In previous writings, we have explored the various M&A strategies employed within the MSP market throughout the years. It is no secret that roll-up strategies have been historically popular within the MSP professional community. Still, it occurred to me that we have never addressed why such a strategy would be so popular and yet have such poor results.
Today, we will address that question.
MSP Roll Up Objectives
In determining why a business or investor would even consider a roll-up strategy, we need look no further than the stated goals of those pursuing roll-ups. Simply put, the roll-up is designed to acquire a group of MSP businesses and remove inefficiencies. The result will be accretive results more considerable than the sum of the individual MSPs before the roll-up. You can see why such a strategy would be attractive to an investor. Assuming you have the capital, acquiring a group of MSPs would result in a much larger MSP organization with more clients, more recurring revenue, and greater efficiencies.
We will explore the challenges associated with this strategy in a moment, but for now, you can see why pursuing a roll-up would be one of the best ways to achieve significant growth in the managed services sector. However, we cannot only look at the stated intentions or objectives of pursuing a roll-up strategy; we must also look at the actual results of attempted roll-ups and determine whether the goals were met.
Roll-up Challenges
I don't want to spend too much time regurgitating how roll-ups have failed in the past; we have already spent considerable time discussing that topic within this community. I will, though, list a few of the more commonly known facts so first-time readers can become acquainted with them.
- Roll-up strategies often ignore the challenges of integrating so many MSP businesses
- Roll-ups view MSP business relationships as commodities when they are more appropriately viewed as professional services relationships
- We have no examples of successfully executed MSP roll-ups
